Monday, June 20, 2011

Libertarianism and the Tamerlane Principle

Still in Japan and working hard, so expect posting to be infrequent...

Anyway, I encourage everyone to read this excellent article by Stephen Metcalf. It's about Robert Nozick and the birth of modern American libertarianism. The piece does a great job of critiquing libertarianism from the standard "social welfare"/"institutions" point of view.

I want to be clear: I think that if the only thing wrong with libertarianism were that it rejects social welfare and ignores real-world institutions, that would be more than enough to allow me to oppose the dogma in good conscience. But I tend to criticize libertarian thought from a very different angle.

My problem with libertarianism is something I call the "Tamerlane Principle." Before I explain it, consider this account of the conquests of the 14th Century Central Asian warlord and conqueror Timur the Lame, commonly known as Tamerlane:

At the news of the [up]rising, [Tamerlane] stayed his march into the mountains, and took a terrible vengeance...he showed himself to be a "hurricane of annihilation"...[H]e commanded cruelty and devastation such as made people shudder even in those cruel days...When he stormed the rebellious city of Sabzevar...he had 2,000 persons walled up alive, as a tower of horror "for a warning for all who should dare to revolt and as an indication of Tamerlane's vengeance"...The sword of the executioner made an end of the dynasty of Herat; the towns of the Sserbedars became heaps of ruin...The mountain cities, which defended themselves valiantly, were crowned with pyramids of skulls; and in the capital city...the inhabitants were put to the sword by the conqueror, "even to the centenarians, and to the baby in the cradle." Then the soldiers carried off everything "down to the nails from the doors"; and whatever was combustible went up in flames. City after city, fortress after fortress, fell into the hands of the conquerors, "until there were no more enemies left in these provinces, and no one who did not obey Tamerlane."

Delightful, isn't it? But this was something that really happened. The truth is, this sort of conquest and destruction was a regular feature of human history for thousands of years.

What would Robert Nozick say if he read that passage? He probably wouldn't see a strong connection between the conquests of Tamerlane and the question of government intervention in a modern capitalist economy. But I do. The connection is this:

Tamerlane is always over the horizon, waiting to strike. There will always be conquerors waiting for the chance to conquer and pillage the soft civilized nations of the world. If you think Tamerlane is ancient history, just look up Pol Pot, Joseph Kony, Hitler, etc. This is a recurrent phenomenon. The only thing that can protect people against the Tamerlanes of the world is a strong, economically prosperous, well-organized nation state. And the only way you get a strong, economically prosperous, well-organized nation state is to have a strong, centralized government that provides lots of public goods. Roads, ports, schools, technological R&D. You need these things because everything we know about economic development says that these things are absolutely essential for a nation to have a high GDP. And a high GDP is necessary for a nation to win wars with hypothetical Tamerlanes.

This is why modern American libertarianism is so very, very flawed. The ideology professes to value liberty above all else, but it ignores the dynamic aspect. There is liberty today, and there is liberty tomorrow. Sometimes violations of liberty today (such as an income tax) are necessary to protect the body politic from far, far, far more heinous violations of liberty tomorrow.

Most libertarians recognize this, and freely admit that defense is an exception to the "small government" rule. But an army is not going to be a very effective Tamerlane repellant without a large GDP and advanced technology to back it up. And what modern American libertarians either fail to understand, or refuse to accept, is that public goods are essential for a high GDP.

Stephen Metcalf declares that Nozick "was able to separate out a normative claim (that liberty is the fundamental value of values, and should be maximized) from an empirical claim (that the most efficient method for allocating goods and services is a market economy)." I wish that this were true, but it is not. Nozick, and his present-day acolytes, make an argument for unfettered capitalism that relies fundamentally on the empirical claim that public goods are not necessary for a strong economy. If public goods are necessary for a strong economy, then maximizing liberty requires that a government tax and spend.

Robert Nozick's radical prescription for a laissez-faire economy, if followed to the extreme, would put us in a position to be overrun by the first Tamerlane that wandered by and noticed our amber waves of grain. If you think this is a silly, alarmist statement, just observe how our recent neglect of public goods, along with our refusal to tax ourselves, is forcing us to make defense cuts (and will soon force us to make many more). This is where decades of trust in Nozick has gotten us. It's not a civilizational crisis yet, but it's not pretty.

Update: Wow, Metcalf's essay really seems to have touched a nerve. Will Wilkinson: "If only a levee separated polite discourse from the sort of ax-grinding indifference to fairness and truth Mr Metcalf displays in his essay." Reihan Salam: "Alas, I have just had the distinct displeasure of reading a critique of Nozick that is, I’m sorry to say, neither provocative nor intelligent. I wish I could get those minutes of my life back." Tyler Cowen: "I agree with Reihan that the recent web critique of Nozick, which I will not link to, was just awful." And here's Jason Kuznicki with an actual rebuttal. But so far, no libertarian bloggers, to my knowledge, have answered the Tamerlane Critique. Can I have been the first person to think of this idea? It seems highly unlikely.

39 comments:

Your case is undermined somewhat by two of the examples of modern Tamerlanes that you picked. Both Hitler and especially Pol Pot did far more harm to their state's own citizens than to others. In Hitler's case, of course, much of the damage was done after conquests of other states. They are emblematic of the threat posed by a strong state and especially a strong military to a country's own people.

If I were a libertarian I think this is the first point I'd seize on in a rebuttal. I think it's answerable - in general, a high GDP appears to prevent the civil wars and genocides in which governments slaughter their own people - but Nazi Germany remains a problematic case.

Jason- I don't disagree that Hitler isn't a great example, but the Soviets suffered more than five times the casualties Germany did. Add all the Allies together and Hitler did a lot more damage (simply in terms of lives lost) to the states surrounding Germany than it was literally possible for Germany to suffer itself.

A better modern example would be Japan and the Asian countries that it stomped all over in WW2 - especially China.

Both Hitler and especially Pol Pot did far more harm to their state's own citizens than to others. In Hitler's case, of course, much of the damage was done after conquests of other states.

So, let me get this straight...your case is that Hitler didn't represent an international threat, because after he conquered a bunch of other countries and started massacring their citizens, those conquered victims counted as Hitler's own people???

That may be the single most laughable argument I have ever read, ever.

Rather than fearing the "big" Tamerlane, I fear the selective libertarian. Those professing libertarian views who actually hold power are most likely to combine economic libertarianism with social conservatism. Heavy handed intrusion into private lives coupled with increasing wealth and power in the hands of a few is a dangerous combination.

"And the only way you get a strong, economically prosperous, well-organized nation state is to have a strong, centralized government that provides lots of public goods. Roads, ports, schools, technological R&D. You need these things because everything we know about economic development says that these things are absolutely essential for a nation to have a high GDP."

I realize this is just your blog, but your professors let you get away with assertions like this? The ONLY way to have a strong prosperous nation state is to have craploads of publicly provided goods? Besides laws/regulatory institutions and a military, please tell me who says all the rest of that shit has to be provided by the state?

There's a real economic classification for a good to be a "public good" and it is not the criteria you outlined. You're in good company because the author also doesn't know the classification of public goods or made an elementary mistake.

Somewhat oddly, I was thinking about the example of public provision of education, reading the post, and Josh, too, apparently, wondered about schools. He's correct that education does not fit into Samuelson's classic conception of public goods, as being non-rival and non-excludable. (Why didn't Samuelson say, non-exclusive?)

The framework of analysis ought to be that of sunk-cost investment, the diffusion of the gains from increasing productivity and economic rents.

High GDP and productivity require lots of sunk-cost investments, and sunk-cost investments, by definition, can be difficult to recover in a competitive market. (They are "sunk" and so don't figure in ex-post decision-making or bargaining; at best, you might see, for example, an indirect effect on market-power from a "barrier to entry".) Increased productivity usually means increased production, which tends to drive down the price of goods, diffusing the gains of increased productivity, away from the productive worker or the investor making the investment in increased productivity.

If you look at sectors with rapidly rising productivity, you will see that they are also sectors with stagnating or even falling wages.

So, no, in the Samuelsonian sense, education is not a public good, but an educated population is a necessary foundation for a highly productive political economy. And, the gains from an individual's education, in a competitive market economy, tend to diffuse away from the individual, so it is not generally feasible to count on the individual making a sunk-cost investment in education, and, later, privately recovering it in higher wages.

Even the pious neo-liberal argument that the highly educated earn more (which they do, due to class channelling into bureaucratic power, and credentials and professional licenses and guilds, but not because of a specious 'skills-biased' technogical change) is undermined by the fact that the educated, to realize higher productivity, have to gather in urban areas, where they pay out a large part of their nominally higher incomes as higher rents.

Libertarians often seem to think that economics is a morality play, and the competitive market economy is that ideal situation in which individual virtue is rewarded. In policy terms, it often seems to correspond with a oblique defense of the interests of rentiers. (Funny how that works, eh?)

An alternative view is that market economies, in rewarding the rentiers, are rewarding the least virtuous, and that government improves outcomes by taxing economic rents and financing sunk-cost investments, which otherwise could not be financed, because the investment could not be recovered (at least not without impairing the gains), other than through taxes or other gov't measures.

The analysis of diffusion of productivity gains and their flow to economic rents was one of the big accomplishments of Classical Economics. For the Classicals, these were literally land rents, but the concept of economic rents was later generalized. I imagine that the traditional American reliance on local property taxes to finance public schools owes something to the classical 19th century analysis, particularly Henry George's popular "single-tax" version.

Bruce, economic rent does not exist if you consider the risk of loss or failure when a new factory is built. If I spend one million dollars on a factory that makes purple footballs, I am "gambling" within the time and money I spend on that new factory. If people don't want purple footballs and my business fails, I accept the loss. If my business succeeds, I make balls at a lower cost than I sell them, and that difference (economic rent) is my reward for gambling with my time and money.

Sunk costs are part of every business, and each investor decides if there is a need for purple footballs and loses his entire sunk cost if his judgment turns out to be wrong.

Noah, your entire post boils down to one statement, that many public goods are needed for a high-GDP economy. This is the only thing that a Libertarian would take issue with. Libertarians believe that all or most "public" goods can be provided by private enterprise at a lower cost and higher quality, but still recognize the need for roads and postal services, health care, water and power, etc.

Why do you feel that the public goods we have today could not be provided by private businesses?

Noah, your entire post boils down to one statement, that many public goods are needed for a high-GDP economy.

Well, it's three statements, really:

1. Without a strong military defense, a society will eventually be enslaved.

2. A high-GDP economy is necessary for a strong military defense.

3. Many public goods are needed for a high-GDP economy.

Libertarians believe that all or most "public" goods can be provided by private enterprise at a lower cost and higher quality

Fine. But that belief is an empirical claim. It can be validated or contradicted with real-world evidence. Libertarians like to say that their ideology flows only from "deontological" claims; that you can get from the statement "I like liberty more than anything else" to the statement "We should institute a libertarian regime." That's just not the case.

Why do you feel that the public goods we have today could not be provided by private businesses?

Well, a combination of theory and history. Some goods we know to be nonrival - for example, research. Other goods, like roads and schools, have public and private aspects, but when we look at history, we just don't see any rich or successful societies where those things are mostly privately provided. That doesn't mean it's impossible, and it doesn't mean we shouldn't have private schools and private roads. But it means that the burden of proof (of why we should privatize those things) shifts back onto the libertarian.

It's a great point Noah, because I think it goes to the essence of the foolishness of libertarianism, as opposed to the absurdity of the contortions they are forced to undergo to make it seem sensible. I'd say though that an even more fitting analogy comes from the movie 'Casino'.

The scene I have in mind is where Nicky informs Ace of his self-serving ignorance... in so many words: "You only exist out here because of me! That's the only reason! Without *me*, you, personally, every fuckin' wise guy skell around'll take a piece of your fuckin' Jew ass! Then where you gonna go?"

Which is to say the expense and nuisance of having Nicky stealing, dumping bodies in the dessert and otherwise bringing 'murderous heat' down on Ace's operation was just another part of the cost of doing business. Which means Ace's whinging about it was about as substantive as if he were whinging that his dealers didn't work for free. The fact that what necessitates Nicky is morally... intricate... doesn't make the reality of Ace's need for him any less real.

Though I'd imagine advocates of a role for government won't appreciate that analogy, you can quite neatly substitute Ace here for well-off libertarians and Nicky for the government, and not just because the government keeps the well off libertarians safe from external threats like invading armies (to your analogy).

That's because the government also keeps the well off libertarians safe from all manner of internal threats- everything from criminals to would-be revolutionaries plebes, (see e.g. Sytagma square), to a less-guillotines prone angry populace (as when Obama told the Wall Street types during the financial reform debate that he was the only thing standing between them and the pitchfork wielding brigades wanting to impose punitive taxes and all other revenge type measures). In either case, if not for government, 'then where they gonna go?'

This is to say that, in a free society, the consent of the governed rests on the existence and enforcement of a social contract. That means, in particular, policies that first and foremost provide at least some measure of equality of opportunity, and secondarily a minimum safety net for the least fortunate amongst us (especially those who had no choice in the matter: the ill, the disabled and impoverished children, of which there are legions). Paul Ryan and the Republicans are finding out how just how real these principles are to the governed (including Republicans) by the reception their tax cuts for the rich and evisceration of the social safety net has received.

Ultimately, we don't live on a frictionless surface. As Col. Jessup said, to go to another 90s movie analogy, we live in a world with walls that have to be manned by people with guns. In such a world, an 'interventionist' government is the price of a free society, whether the rubes get that or not.

Noah,Yes, three statements. I meant to say your entire post is only conflicting with Libertarian ideology in one statement. Libertarians generally agree that a strong military is needed and that a strong economy is needed to support it. They do not agree that public goods are needed to create a strong economy. They believe exactly the opposite; that the more public goods are created the lower the GDP will be, relative to what it would be without any public goods, excepting military and rule of law.

Regarding roads -- are they any different than rail lines? Why were huge rail projects completed by private companies? Would private companies not have done the same thing with freeway systems if they were not created by government?

Schooling was provided by private churches, generally, before government took over. Why did schools first exist without government?

The first free public libraries were created by Carnegie. They are also now a public good.

Were the first electricity companies created by government?

About half of rural city water supplies are still provided by private firms.

Regarding research, do you imagine that private companies are not doing research, or that grants would not be offered to support it?

I can't think of anything that was not originally created and provided by private firms that we now consider a public good.

Stone, business entrepreneurs are typically obsessed with finding "business models" that promise an opportunity to recover their sunk-cost investments, because it is not, typically, all that easy to do.

Railroads were the classic 19th century example, involving the promise of a huge gain in productivity and benefit to the whole society, but also requiring an enormous sunk-cost investment. Ex ante railroads are a no brainer, but ex post, meaning after the railroad is built and equipped with rolling stock and salaried staff, it is not obvious that an efficient price for transport services is going to provide any recovery of that sunk cost investment. The undoubtedly enormous advantages of the railroad tend to diffuse away, and show up in the value of real property and businesses adjacent to the railroads.

People caught on to this state of affairs fairly quickly, and railroads were often financed, in part, by investments in, and/or grants of land, and railroads would promote and develop adjacent businesses. And, railroads developed ad valorem rate structures -- a form of price discrimination, in an effort to reap a bit more of the consumer surplus.

People, who are stuck in the "moral" narrative of economics, can have a lot of trouble seeing this kind of problem as a problem requiring an institutional solution, as a functional problem, requiring an institutional mechanism to solve it, if the very great benefits in economic development from building railroads are to be realized.

Government was involved in solving these problems, and in providing an orderly process of bankruptcy, when the problems were not adequately solved, as was often the case.

A functional, though may be not a "moral" theory, can help to analyze these kinds of problems, and understand what shapes the practical solutions that survive.

Bruce, you can't "recover" sunk costs. That is why they are sunk. They cannot be recovered.

I don't understand why it would be a problem for rail companies to develop land near their lines. Is it also a problem for golf course builders to sell plots of land for different prices, based on the location of each plot in relationship to the course?

The thing about public goods isn't that private companies are unable to provide them, it's that they are unwilling to provide them in economically efficient quantities, since companies can't capture all of the returns from public goods. Whether or not roads, schools, research, etc. can be optimally provided by the private sector is a topic for another post (or several dozen other posts).

But here's my point. Nozickian libertarians say "Government intervention in the economy is always wrong because it always harms individual liberty." Given the Tamerlane Principle, that is just not right. Libertarians need to shift their argument to "Government intervention in the economy is wrong if it does not substantially increase economic efficiency." Note that that is a very different argument.

If we are all living in a simple island economy, and I invent a fishing net that is better than anyone else's, what do you think should be done if I flood the market with fish, trading fish for far less than anyone else, instead of sharing the design? All other fishermen would be out of work. Now what?

Would it benefit society the most if everyone had the net?

Is it okay to stop me from hiding the design from my fellow islanders? Is that a problem that is best to solve with government?

Stone: "you can't 'recover' sunk costs. That is why they are sunk. They cannot be recovered."

That, of course, would be (part of) my point. Yet, capitalists make sunk-cost investments, expecting to earn a return on them, that is, to "recover" them and then some. That return, if it occurs, is an "economic rent". See your own purple footballs example.

It is a 'difficult' problem in the twin senses, that it poses a dilemma, and that dilemma manifests as a social conflict that requires political effort and institution-building to resolve. Your island fisherman with a secret net illustrates some of the inevitable political questions.

We want people to have the incentive to make sunk-cost investments, in, say, railroads, and, yet, we also want, once the railroad is built, to have the gains diffuse away to a large extent. The use of a unitary "we" may obscure the reality of political conflict. The people, who invest in the railroad, will have interests that conflict with the interests of, say, farmers, who own land adjacent to the railroad, and those interests and conflicts will change -- being one set before the railroad is built, and a different set after.

This dilemma isn't limited to the case of "public goods" as Samuelson defined them; rail transport is not a public good; neither is education (correction welcome).

But, the dynamism of the economy is tied to the ability to use "economic rents" in financing private sunk-cost investments, for similar reasons that taxes are necessary to finance public goods: there's no "natural" assurance that a private investor will be able to earn an return, even on a clearly worthwhile investment.

Political agreements and institution-building are always implicated. There are practical, albeit imperfect solutions, as I said, but they involve institution-building and political choices.

We could let the railroad own all the land adjacent to the railroad, and develop all of the businesses on that land, thus capturing all of the economic rents. Call that the Communist option, where the society internalizes the all the costs and benefits and attempts to administer and plan, accordingly. Not very practical, though, as experience has proven.

Or, we could let the railroad institute a system of strictly ad valorem rates, which allowed the railroad to extract much of the "consumer surplus" of their shippers. Call that the monopoly capitalism option. Also, not all that practical.

I think public education arose from practical experience with the diffusion of benefits from education away from the educated individual, which makes financing the sunk-cost investment from future returns impossible, and also, from bad experiences with for-profit schools (administrative control issues and asymmetric information problems, which might be better addressed elsewhere, but also figure in the libertarian programme).

I wanted to bring "rents" into it, because I think "public goods" doesn't capture the essence of what is wrong with Nozick's argument, and why Nozick's philosophy (fused with Hayek, Friedman, etc.) was so poisonous to the New Deal legacy. The New Deal financed large-scale economic development, income re-distribution and regulatory institutions with heavy taxation of economic rents. Nozick was attacking that taxation of economic rents.

Wilt Chamberlain's large income, we may reasonably suppose, was composed largely of "economic rent" in Pareto's sense: what he earned was way in excess of the minimum it would have cost to have him play basketball instead of his next best opportunity. His marginal product was very high, which Nozick tendentitiously attributes to personal talent, because Chamberlain could combine his ability with the technology of arenas and the organization of basketball as a spectator sport.

Here's the thing about "economic rent": economic rents mark out the structure of the economy, the loci of institutional power, the potential for dynamic change. The Schumpeterian entrepreneur is changing the structure of the economy, destroying the rents of the old structure, in the hope of securing rents in the new structure, sufficient to pay back his (sunk-cost) investment in the change.

Economists sometimes write pejoratively of economic rents, implying that it is always possible for economic rents to simply be competed away, or as if economic rents are always and simply the artificial and superfluous creation of government interference. Neither view can be sustained. As long as the economy has a particular technological and institutional structure, there are economic rents. Dynamic change and competition (in a very broad sense of conflict in a de-centralized system) in the economy simply shifts economic rents around. Building a railroad increases the rents earned by adjacent land. Building a basketball league and an arena, the advent of television, enables a Wilt Chamberlain to "earn" a huge economic rent on the application of his particular talents. Where the economic rent "goes" is akin to an accident, and, without considerable political and institutional creativity, does not necessarily aid the political economy's dynamism.

Failing to tax economic rents heavily, gives people an incentive to seek economic rents from the political process. Our present sclerotic condition appears to be related to the end-result of 30 years of such accelerated rent-seeking. The economy has so little dynamism left, that we are looking at a "lost decade".

Bruce, you didn't understand my point. Sunk costs are gone forever. Just like a lottery ticket. When the purchase is made, the dollar cannot be "recovered" and no one expects to do so. The dollar is a bet; a gamble, just like building railroad tracks.

I see this a lot, the argument that a libertarian world would have a different set of risks from a non-libertarian world, therefore we should reject libertarianism. That doesn't follow.

In order to reach the conclusion you present here, you have to enumerate all of the costs that a government imposes, including e.g. the risk that a government will commit democide, or become a tool for the governors to enrich themselves at the expense of the governed. Then you enumerate all of the benefits of having a government. Then you have to compare costs and benefits.

Otherwise, you have only made the case that a libertarian world would have certain undesirable characteristics but that's true of any ideology, not just libertarianism.

Probably that human history has been full of injustice and the essential feature of the injustice is coercion. You seem to rest your "problem" with libertarianism on the fact that your willing to accept a little of what Nozick would call injustice to secure a big portion of what Nozick would call justice (give up a lil' liberty for a lot more). The question, then, in your mind, becomes what's the best balance, the golden mean of liberty-sacrificing for liberty-security. That's fair enough. You prefer certain outcomes to others and you're willing to make certain trade offs. But this doesn't address Nozicks fundamental point: that it is unjust to force your preference on others. So at the point your golden-mean solution to the problem of tamerlane involves the use of coercion he would still argue that it was unjust.

Now you can claim that such a notion of justice is too abstract, too divorced from the "real world" but if you want to make that claim you better drop economics and start philosophy, probably with plato, because you vague, loose and floppy definition of justice isn't, I suspect, going to get you very far.

"Tamerlane is always over the horizon, waiting to strike. There will always be conquerors waiting for the chance to conquer and pillage the soft civilized nations of the world."

You can't say this for certain. There have been many aspect of human history that people thought we be around forever but are now gone. Still, point taken, the possibility is there.

"If you think Tamerlane is ancient history, just look up Pol Pot, Joseph Kony, Hitler, etc. This is a recurrent phenomenon. The only thing that can protect people against the Tamerlanes of the world is a strong, economically prosperous, well-organized nation state."

As a rather irate comment already pointed out, the nation state was already presupposed by these thugs. They realized that what they needed to do was gain control of the nation state, the centralized, authority wielding apparatus in order to utilize it to serve their ends. Do you really think that Hitler would have gotten very far if he had to construct the nation state of germany from the ground up? Of course not. He was relying on a long history of statist policies in Germany that had progressively centralized power. Without such a centralized form of power I highly doubt Hitler would have been much of a threat. But, with that said, GIVEN the existence of nation states that can be co-opted by psychos, then certainly some kind of cooperation and coordination is needed in order to mount a resistance. Whether or not that coordination relies on the coercive authority of the state may be likely and may be the only examples available in history and you might be fine resting your case on that fact. But the fact remains that novel forms of coordination are possible and can possibly be more just and more efficient. The beneficial changes in history always are started by optimists.

It's kind of amazing how many criticisms of libertarianism fall short of their mark. Really the only valid criticism of libertarianism has to do with levels of public goods produced.

Libertarians believe that, compared to governments, free-markets can efficiently produce equivalent levels of most public goods...

"Put differently, voters in democratic regimes are unwilling to give up the protections offered by the welfare state, even when those protections are produced inefficiently, and at very high cost. Libertarians are not going to succeed politically by telling voters that they should give up welfare-state protections. Rather, libertarians need to show how freemarket programs will produce social security at levels comparable to those provided by welfare-state systems" - Jonathan R. Macey

Coming from a libertarian background I kind of assumed that the levels would be equivalent for most public goods. The problem is those darn free-riders.

So on the libertarian side you have the free-rider problem and on the liberal side you have the problem of government inefficiency.

The libertarian side has the market going for it though. The government is crap at picking winners and losers.

Let's take roads for example. Let's say that every time a freeway started to become congested the government added a lane. Sounds good right? On the other hand, perhaps with a libertarian system a new lane might not be added. Sounds bad right?

Well...as congestion built up there would be greater incentives for people to carpool...and/or bike to work...and/or dream about having their own personal jet packs...and/or dream about teleportation devices...

If the government had never built a single road...would we all be flying around right now with compact and efficient personal jet packs? Who knows...but increased demand for an under-supplied good increases market incentives to provide alternatives that perhaps we've never even considered.

But any clamor for more or improved public goods is like a siren call to those seeking public office. Before demand can be really built up and innovative market solutions provided... politicians promise voters more public goods with less taxes.

In any case, let's go back to the basic problem of free-riders vs government inefficiency. It's just like being stuck between a rock and a hard place.

Rather than the libertarian approach of trying to kick various public goods over to the free-market...why not apply free-market principles to government organizations?

I've labeled this approach "pragmatarianism". Basically, taxpayers would be able to directly allocate their taxes among the various government organizations at anytime throughout the year.

Two points - on defense, absolutely correct; the libertarian anarchist types who insist that private defense corporations could work (really guys! David Friedman said it!) are certainly vulnerable to this sort of claim. Should we have a defense so costly that it absorbs a large fraction of GDP? Probably not - let's get rid of half or more and then we can debate the rest.

On the second, some public goods probably are necessary to GDP growth; it isn't clear which and to what extent, which is the real question people need to be asking (and which your critique glosses over).

I'm perfectly willing to reduce the federal government to, let's say (arbitrary number warning here) 10% of GDP, and then have a debate about which public goods are absolutely essential to growth and how much they really cost. The main issue at the moment is that there is no possible justification for many of the things government does at present; most are clearly not essential to high-GDP growth (many are detrimental).

So, the wrap up an overly long comment: critique of idealistic libertarian theories, spot-on. Critique of actual libertarian beliefs relative to government as it is, not so much.

This is a very foolish way to make a very simple point. If you are correct as an empirical matter that "public goods" are necessary for a modern, high-GDP economy, then it is beside the point to mention the threat of would-be Tamerlanes to take away everyone's liberties. That is not to say that the prospect of Tamerlanes aren't scary. Of course they are. The problem is that your hypothesis about "public goods" already contradicts a great deal of libertarian theorizing, including Nozick's, about how such a society could work. Maybe a Tamerlane would come along to destroy or enslave a "low GDP" libertarian society, but no one would be living there because it's not the sort of society any libertarian envisions.